I use usb disk security Along with kis 2010. They both do the job for me. I've never been infected by any kind of virii of any sort for the past 2 years now. You could give it a try too. Oh and btw.. Usb disk security isn't a freeware. I guess you know where you should be looking for it.
I faced the same problem around a month ago. This New Folder.exe virus basically disable task manager and registry editor. It also eats up 50% processor.
To remove it I just downloaded this small software and it worked like a charm for me.